The Subjective Cost of Young Children:
A European Comparison
Sonja Spitzer | International Institute for Applied Systems Analysis Angela Greulich | Université de Paris 1 Panthéon-Sorbonne
Bernhard Hammer | Vienna Institute of Demography Contact: sonja.spitzer@iiasa.ac.at
Introduction Theory & Method Data & Descriptives Results
Limitations
Research questions
Nordic: Denmark, Finland, Iceland, Norway, Sweden Western: Belgium, France, Netherlands
German-speaking: Austria, Switzerland Liberal: Ireland, UK
Southern: Cyprus, Greece, Spain, Italy, Malta, Portugal CEE: Bulgaria, Czech Republic, Estonia, Croatia,
Hungary, Lithuania, Latvia, Poland, Romania, Serbia, Slovenia, Slovakia
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“A household may have different sources of income and more than one household member may contribute to it. Thinking of your household's total income, is your household able to make ends meet, namely, to pay for its usual necessary expenses?”
1 - With great difficulty 2 - With difficulty 3 - With some difficulty
4 - Fairly easily 5 - Easily 6 - Very easily
Subjective economic wellbeing (SEW)
We investigate how the birth of a child relates to its par- ents’ subjective economic wellbeing (SEW) and com- pare the effect between European regions.
Subjective economic wellbeing before and after the birth of the first child: children are costly...
? How does childbirth affect parents’ SEW short- ly after childbirth?
How do direct and indirect costs contribute to the change in SEW after childbirth?
How do direct and indirect costs of children differ across European regions?
Do family-related benefits compensate for the child costs occurring shortly after childbirth?
Cost components:
Total net cost (T) = direct costs (d) + indirect costs (i) - benefits (b)
Direct costs (d)
Indirect costs (i)
Benefits (b)
Higher expenses for food, diapers, a bigger house, etc.
Labour income losses (opportunity costs)
Birth grants, parental and maternity leave payments, tax deductions, etc.
SEWjt = β0 + β1 CHILDRENjt + β2 Xjt + β3 INCOMEjt +μt +αj +εjt
CHILDRENjt : number of children in household j at time t Xjt : control variables age, age squared, and health
INCOMEjt : total net household income or labour income of both partners μt : time fixed effect
αj : time-constant error term (individual fixed effect) εjt : error term, varies with household and time
2. Disentangling direct and indirect costs of children
The drop in SEW is mainly caused by increased expenses due to the birth of a child (direct costs), which are largest in high-income regions. Immediate labour income losses of mothers (indirect costs) are less important in explaining the decrease. These income losses are closely related to the employment patterns of mothers and are highest in regions where women take extensive parental leave. Our results are relevant for both policymakers and potential parents, since the cost of raising children is likely to affect fertility and labour supply decisions.
The analysis utilises longitudinal data from the Europe- an Union Statistics of Income and Living Conditions (EU-SILC). Its panel design facilitates observing SEW before and after the birth, permitting a distinct identifi- cation of the impact that young children have on SEW.
EU-SILC longitudinal microdata for 30 countries 260,000+ observations from 125,000+ households Only couples living without additional adults
Couples with and without children 2004 - 2015
Women aged 16-40, men aged ≥ 16
Maximum of four waves per couple Nordic 0.232 0.225 0.081
Western 0.231 0.233
German speaking 0.190 0.182
Liberal 0.198 -- --
Southern 0.152 0.155 0.011
CEE 0.179 0.178
0.002 0.034
Total net cost Direct costs Indirect costs
β1.1 β1.2 β1.1 - β1.3
Self-selection into parenthood cannot be accounted for. If some couples decide not to become parents because they expect a drop in SEW due to children, the costs of children are underestimated.
Long-term effects of children on SEW cannot be analysed.
Consequently, long-term indirect costs of children cannot be observed, and neither can adaptations to the costs of children in the long run.
It cannot be observed whether expectations or general well- being change with the birth of a child.
Country groups: Cost components vary by country due to different foci in family policies, and due to differences in norms, institutions, and macroeconomic conditions
This work received funding from the Austrian Federal Ministry of Science, Research, and Economy and the French Agence nationale de larecherche (Award no. ANR-16-MYBL-0001-02) in the framework of the Joint Programming Initia- tive (JPI) "More Years, Better Lives – The Challenges and Opportunities of Demographic Change". Furthermore, it received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 Programme (Grant Agreement No. 741105).
SEWjt = β0 + β1.1 CHILDRENjt + β2 Xjt +μt +αj +εjt T = d + i - b
β1.1 = d + i - b
SEWjt = β0 + β1.2 CHILDRENjt + β2 Xjt + β3 HOUSEHOLD INC. jt +μt +αj +εjt β1.2 = d
SEWjt = β0 + β1.3 CHILDRENjt + β2 Xjt + β3 LABOUR INC. jt +μt +αj +εjt β1.3 = d - b
T = d + i - b i = T - (d - b) i = β1.1 - β1.3
1. Modelling the effect of children on SEW
Estimation methods: Linear fixed effects model with OLS and “Blow-up and cluster” estimator for ordered outcomes (Baetschmann et al. 2011)
Varying cost components: Share of women in employ- ment before and after the birth of their first child
We quantify and compare the cost of children in Europe by analysing the effect of child births on parents’ self-reported ability to make ends meet, which is referred to as subjective economic wellbeing.
We interpret the drop in SEW as the total subjec- tive net cost of children that a household must bear. This total net cost is composed of direct costs and indirect costs, minus any family-relat- ed benefits that a household receives.
This study is based on EU-SILC longitudinal data for 30 European countries from 2004 to 2015, en- abling comparisons between country groups of different welfare regimes. Subjective child costs are analysed for children aged zero to three.
Results show that newborns decrease SEW in all regions. In the first years after the birth, in- direct costs are mostly compensated for via public transfers or increased labour income of fathers, while direct costs of children are not.
Source: EU-SILC longitudinal data 2004-2015. This graph is based on the 4,709 couples in the sample that had their first child, but no additional child, during the observed period. In total, they provided 14,639 observations.
SEW is set to 0 in the year before the birth was observed, which is why the confidence intervals at time -1 are not visible. Household level weights were applied.
Years before and after the first birth was observed
Change in SEW
Birth
Mean SEW
0.1 0.3 0.5 0.7 0.9
-3 -2 -1 0 1 2
0.1 0.3 0.5 0.7 0.9
-3 -2 -1 0 1 2
0.1 0.3 0.5 0.7 0.9
-3 -2 -1 0 1 2
0.1 0.3 0.5 0.7 0.9
-3 -2 -1 0 1 2
0.1 0.3 0.5 0.7 0.9
-3 -2 -1 0 1 2
0.1 0.3 0.5 0.7 0.9
-3 -2 -1 0 1 2
Source: EU-SILC longitudinal data 2004-2015. This graph is based on the 4,709 couples in the sample that had their first child, but no additional child, during the observed period. In total, they provided 14,638 observations.
Years before and after the first birth was observed
Share of women in employment (full-time and part-time)
Liberal Southern CEE
Nordic Western German-speaking
Birth Birth Birth
Birth Birth Birth
-0.35 -0.25 -0.15 -0.05 0.05
-3 -2 -1 0 1 2
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